Q: WHY DO BUSINESS OWNERS NEED BUSINESS VALUATIONS?

A: When people are selling real estate, banks always require a formal appraisal from a 3rd party appraiser. The reason is 3rd party appraisers establish an unbiased value for the property. The value established by appraisers can be used for buy/sell agreement and financing options. The same is true for businesses. Since businesses are all very different and there are many different valuation methods for different types of businesses, it is very important to use a professional appraiser to appraise the business value.

There are 5 reasons to obtain a business valuation:

1. Planning for sale
2. Obtaining financing
3. Conducting annual review
4. Enhancing value
5. Tax or legal issues

Q: HOW DO BUSINESS VALUE EXPERTS ESTABLISH THE VALUE FOR A BUSINESS?

A: Ultimately, the business is worth what the market will bear. This means that the business is worth the highest price a Buyer is willing to pay!

With that said, although we look at nine different valuation methodologies, there are four that generally carry the most weight. They are: (1) multiple of earnings, (2) comparable transactions analysis, (3) asset-based valuation, and (4) discounted cash flow analysis. Valuation experts will value a company with more than one of the methodologies simultaneously, comparing results among the different approaches to determine a correct valuation, all the time keeping in mind the strengths and weaknesses inherent in each approach.

Q: HOW LONG DOES IT TAKE?

A: in most cases, we can provide the valuation within 10 business days of receiving the COMPLETE packet.

Q: WHAT DO I GET IN THE REPORT?

Following are examples of different appraisal reports:

Bay Business Investment Opinion of Value - A Bay Business Investment Business Advisor will analyze the financial statements from the business and give a professional opinion on the value of the business. This is not a formal appraisal. Rather, it is a opinion of value based on the seller discretionary cashflow (SDC) of the business, feasibility of obtaining outside financing and total asset value of the business. This Bay Business Investment Opinion of Value is normally FREE if the business owner signs an exclusive representation agreement with Bay Business Investment Business Advisors. Otherwise, it costs $750. It takes 3 business days to perform an opinion of value once all necessary information are received from the seller.
Value Analysis - A 30-35 page financial based summary of the business using general valuation techniques and industry rules of thumb. Should be used primarily for small businesses and for business owners looking for a general range of value. A value analysis report costs $1,200. After all the documents have been collected, it takes 12 business days to get a Value Analysis report.
Formal Business Valuation (Limited Scope) - This limited scope valuation provides a thorough analysis of the Income Statement and Balance Sheet, Common Size Analysis, Comparable Transactions, Industry and economic review and is intended for financial buyer transactions. A formal business valuation costs $4000. . After all the documents have been collected, it takes 12 business days to get a Formal Business Valuation report.
M&A Valuation - An Uniform Standards of Professional Appraisal Practice (USPAP) Formal Narrative intended for the valuation of large companies and strategic mergers & acquisitions. A complete financial and operational review. Depending on the size and scope of the project, a formal M&A valuation costs anywhere from $5,000 to $10,000. After all the documents have been collected, it takes 5-10 weeks to get a M&A Valuation report.
IRS Revenue Ruling 59-60 - An Uniform Standards of Professional Appraisal Practice (USPAP) governed valuation developed for litigation focusing on US Court Reviews, Cited Court Precedents, and in-depth analysis and research of minority and marketability discounts. Intended for Estate Tax, Gift Tax, ESOP’s, Divorce, and any situation requiring litigation. Since this is a very special report, please contact us to get an estimate timeframe and cost.

Q: HOW MUCH DOES IT COST?

The cost will depend on how comprehensive the report is and type of information the business owner can provide. A report can range from as little as $750 to $10,000.00 depending on requirements.

BUSINESS VALUATION SERVICES WE OFFER

Bay Business Investment Opinion of Value - A Bay Business Investment Business Advisor will analyze the financial statements from the business and give a professional opinion on the value of the business. This is not a formal appraisal. Rather, it is a opinion of value based on the seller discretionary cashflow (SDC) of the business, feasibility of obtaining outside financing and total asset value of the business. This Bay Business Investment Opinion of Value is normally FREE if the business owner signs an exclusive representation agreement with Bay Business Investment Business Advisors. Otherwise, it costs $750. It takes 3 business days to perform an opinion of value once all necessary information are received from the seller.
Value Analysis - A 30-35 page financial based summary of the business using general valuation techniques and industry rules of thumb. Should be used primarily for small businesses and for business owners looking for a general range of value. A value analysis report costs $1,200. After all the documents have been collected, it takes 12 business days to get a Value Analysis report.
Formal Business Valuation (Limited Scope) - This limited scope valuation provides a thorough analysis of the Income Statement and Balance Sheet, Common Size Analysis, Comparable Transactions, Industry and economic review and is intended for financial buyer transactions. A formal business valuation costs $4000. After all the documents have been collected, it takes 12 business days to get a Formal Business Valuation report.
M&A Valuation - An Uniform Standards of Professional Appraisal Practice (USPAP) Formal Narrative intended for the valuation of large companies and strategic mergers & acquisitions. A complete financial and operational review. Depending on the size and scope of the project, a formal M&A valuation costs anywhere from $5,000 to $10,000. After all the documents have been collected, it takes 5-10 weeks to get a M&A Valuation report.
IRS Revenue Ruling 59-60 - An Uniform Standards of Professional Appraisal Practice (USPAP) governed valuation developed for litigation focusing on US Court Reviews, Cited Court Precedents, and in-depth analysis and research of minority and marketability discounts. Intended for Estate Tax, Gift Tax, ESOP’s, Divorce, and any situation requiring litigation. Since this is a very special report, please contact us to get an estimate timeframe and cost.

BUSINESS VALUATION CHECKLIST

All businesses are different. Some businesses keep great books and records. Others keep very little. We can work around any situation. However, below is a list of information we would like to have to perform a business valuation.

Financial

Three years of Tax Returns (or Profit & Loss Statements)
Interim Statement of Income and Balance Sheet along with end of year projections if different from annualizing interim numbers.
A List of Assets To Be Sold With the Business along with estimated fair value (i.e. Equipment, Furniture and Fixtures, Vehicles, Accounts Receivable, Inventory, Land and/or Buildings etc.)
Recast Earnings statement for the years concurrent with the Tax Returns and P&L, including salary, benefits, personal vehicle(s) and any other non-operational expenses for the owner.

Operational

A brief summary about the business and/or Selling Memorandum
Ownership (equity interest of 2 or more), management overview and key employees (current)
Percentage of revenues by product (if applicable)
Sales Mix – commercial, residential, key customer breakdown (do any represent 20% of revenue or more?)
Location and Facilities – If available, provide a map of general area and any available pictures of facilities (may include equipment, building, land, etc.)

Buyer Information (if applicable)

Plans for growth – How and why?
Expected Deal Terms – Down payment, seller note (if any), bank note, and interest rate
Buyers view(s) of strengths and weaknesses of company and what will be done to improve weaknesses

Benefits of Business Appraisal

Why do business owners need business valuation?

How do business experts establish the value for a business?

How long does it take?

What do I get in a report?

How much does it cost?

Description of business valuation services

Business valuation checklist